Supreme Court Rules Against File Swapping

The Supreme Court handed movie studios and record labels a sweeping victory against file-swapping, ruling Monday that peer-to-peer companies such as Grokster could be held responsible for the copyright piracy on their networks. In a unanimous decision, the justices ruled companies that build businesses with the active intent of encouraging copyright infringement should be held liable for their customers' illegal actions.

"We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement," Justice David Souter wrote in the majority opinion.

The decision comes as a surprisingly strong victory for copyright companies and stands to reshape an Internet landscape in which the presence of widespread file swapping has become commonplace. The ruling will give the recording industry and movie studios immediate ammunition to file lawsuits against other file-trading companies. It could also be a boon for legal music services such as Apple Computer's iTunes, which could see their strongest competitor, freely downloadable songs, driven further underground.

It won't immediately shut down access to the trading networks, however. The court's ruling will send the case back to the lower courts, which will review the evidence against Grokster and co-defendant StreamCast in the light of Monday's decision.

The file swapping industry has vowed to fight on, in spite of the expected onslaught of legal actions. Said StreamCast Chief Executive Officer Michael Weiss. "We're staying in this for the fight. We're going to continue to innovate and come out with new products."